Expanding Your Business

April 8, 2008 by Mobile Beat Staff Writer

Much like major league baseball, every mobile DJ company at some point must confront the issue of expansion. Whether you are a single operator mulling over the addition of a second system, or a multi-system operator looking to add one more rig to your fleet, you must use the same evaluation process to determine if expansion is the wise path for you.
Firstly, facts and figures, not ego, should be the determining factors when expanding. The addition of a sound system and a complete music library should be approached as an investment. As we all know, when you make an investment you must get a return in order for it to be worthwhile. By all means, resist the temptation to invest in an additional sound system and accompanying music library simply because you have “turned down a few gigs lately.” But how does one know when to expand? Is there a formula? Read on and see.The first step of the decision-making process is extremely vital. I believe that you should track for a period of six months the number of events that you are turning away. A separate log for this purpose, to insure accuracy, is recommended. A study period of this length, to me, is necessary so as to be certain that an additional DJ system will be busy enough to pay for itself.

Next, calculate what the start-up costs are for a sound system and music library. I recommend that you do so for two separate systems: A premium set-up, containing everything that your front-line system has, may run between $6,000 to $10,000. Your second system, a budget sound-system with a basic PA and a scaled down music library, should be in the $4,000 range.

The reason I recommend specifying the costs of two different systems is simple: when you calculate your investment against the number of events you can expect this new system to handle, you may be able to afford only the budget system. In contrast, your facts and figures may allow you to invest in a first class sound system and music library. Read on, and we will go through this process.

Several other factors need to be examined. The average fee for your services must be factored with the number of jobs you expect the new sound system to handle. You can’t just say that if you are turning down 15 jobs in a six-month period, then it is wise or unwise to invest in an additional DJ system. This will vary, depending on how much you can charge for your services.

Single operators looking to add a second DJ system should carefully evaluate what they can charge for a second system. Typically, when you have established yourself as a quality, full-time single-system DJ, you command top dollar in your market. Clients may not want to pay that same amount to someone else who is representing your company. Needless to say, many single operators have been unpleasantly surprised when after adding a new DJ system they discover that clients who wanted them to perform, are unwilling to pay the same fee for an employee.

And when it comes to employees, you’ll need to factor in additional-employee payroll. You’ll have to determine a fair price to pay your employee to represent you, and deduct that from the money that comes in from the jobs they are assigned. The amount of money you pay your employee will directly correspond to the fee that you are charging for your services, in addition to experience. If you are only charging $300 for your services, then it is fair to start a new employee at a salary of $85 to $125 per job, depending on experience. In contrast, if you are charging $500 a job, you should be paying the employee somewhere between $150 to $250 per event.

Your evaluation process would be incomplete without calculating new-system maintenance, a figure that also includes buying new music for this system. If you are purchasing off-the-assembly-line new equipment, then the maintenance of the equipment shouldn’t be a factor for a couple of years. However, if your budget allows for only used equipment, I think you should expect to pay for repairs and upgrades to the system. With the availability of CD subscription services, such as RPM, the upkeep of the music is fairly affordable (around $50.00 per month).

One critical element that has nothing to do with money, but should be carefully evaluated, is the responsibility that goes along with adding a new staff member to your company. Remember, if you train this person and they quit after six months, you must be prepared to hire and train another DJ to fulfill your new system’s bookings. If you are a single operator and have no experience in training and supervising employees, this can be overwhelming. Do you really have the time for this? Are you prepared to deal with clients who call and complain that your DJ “wasn’t as good as you,” or that your new employee was 10 minutes late starting the music? The list goes on and on. The bottom line is that you have to be realistic about the pros and cons of adding another DJ system.

When you do your six-month number-crunching, I think it is important to set a deadline on when you recoup your investment. I think it would be worth the investment if you can turn a profit within 6 to 18 months. In my opinion, any more than 18 months would make the investment of your money and time to be a loss. In this case, you should consider raising your rates, and keep the number of DJ systems you currently have.

Now that we have kept track of the number of jobs that have been turned down over the last six months, let’s compare those numbers with the investment necessary for an additional DJ system. Let’s assume the following scenario:

In six month’s time, you have turned down 25 jobs.
You charge an average of $400 for each job.
The average salary for your new employee to handle those jobs is $150 (remember, you are adding an additional system, and you need to accurately calculate what you will profit from each job).
Music library upkeep @ $50.00 per month for six months, $300.00
In the above scenario, you could expect to profit somewhere around $5,950 in six months, after you pay your employee. In this event, I believe that it would be wise to invest in a premium sound system and music library (somewhere between $6,000 and $10,000).

Let’s look at a different scenario:

In a six month time frame, you have turned down 15 jobs.
You charge an average of $300 for each job.
The average salary for your new employee to handle those jobs is $100
Music library upkeep @ $50.00 per month for 6 months, $300.00
In the above scenario, you could expect to profit some where around $2,700 in a six month time frame, after you pay your employee. Here, I think I would only invest in a budget system where I could turn a profit in approximately one year.

Once you have invested in a new sound system and music library, you must search for and train a new DJ. It is imperative that you organize a good training program, and take the necessary time and effort to coach your new jock on the skills necessary in providing professional DJ services. This topic was covered in the January issue of DJ Times.

I would like to stress how important this is. Sending someone out to represent you with little or no training can result in severe damage to YOUR reputation, and cost you a lot of business. This, of course, defeats the whole purpose of expanding. This happened to me in the early 1980’s, when I attempted to add a second DJ system to handle the volume of gigs that were coming in. I demonstrated to a friend how to hook up the system, and how the record library was organized. I sent him to perform for a regular client who booked me once a month. The morning after his first job, I was awakened by a phone call from the client who said that they didn’t recognize any of the songs the DJ played during the dance. It seems that the DJ played music from his personal collection of records, and played album tracks that were not popular. He wanted to introduce what he perceived to be “future hits,” sort of a trend-setter. I lost my regular client and my reputation was somewhat sullied.

In addition to training a new DJ, you must also be willing to spend more time marketing your services. If you are a single operator, you may very well have kept yourself as busy as you wanted to be, with little or no marketing effort. To maximize the return on your investment in an additional DJ system, you should take the time to go out and drum up some new business. You may want to reconsider your refusal to participate in a bridal show. Why not stop by area banquet facilities to chat with the managers (my favorite way to drum up business!). Or leave brochures with other wedding-related business.

You’ll also need to revise and place a lot of emphasis in your promotional information. As a single system operator in the early 1980’s, all of my business cards had my personal name on them. When I expanded, I was selling the services of more than just me, so I came up with a company name, The DJ Connection. Of course, I had to change all of my promotional information.

Once you invest in an additional system, you are now looking to increase the volume of jobs. This means that you need to impress the potential client into reserving your service.

Your promotional information may make the difference. In this case, I believe it is important that you stress four main factors to the clients:

You have a professional, business-oriented approach.
You have the music that they want.
You have the experience in the type of event that the client is planning.
Your DJ will interact with the guests and have the personality to make the event a fun time for everyone.
As you can see, there are numerous factors that must be evaluated when making the decision to expand your mobile DJ services. The worst thing you can do is to expand without the proper research and preparation. This approach can result in your business name being tarnished, and a loss in revenue for your company. On the other hand, if you carefully evaluate all of the factors listed above, expanding your DJ company can be a richly rewarding experience.

This article originally appeared in the DJ Times magazine, and is posted on this site with their permission

Mobile Beat Staff Writer (371 Posts)

This is the general editors account for Mobile Beat Magazine and Website. Who reads Mobile Beat online and in print and attends Mobile Beat events? DJs, VJs and KJs to start with, especially those who own and operate mobile entertainment services. They provide music, video, lighting and a myriad other entertainment choices for corporate events, wedding receptions, dances and innumerable other gatherings.

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